Fed Survey Finds Tightening Lending Standards (5/6/08)

The percentage of banks tightening lending standards during the past three months was near historic highs in nearly all loan categories, according to the Federal Reserve’s April survey of senior loan officers released on May 5th. Some 80 percent of U.S. banks said they tightened standards for making commercial real estate loans, and about 60 percent said they tightened lending standards on prime mortgages. Those tougher standards also extended to other types of consumer debt. For example, 70 percent of U.S. banks stiffened standards for approving home equity lines of credit, the survey found. About 40 percent of banks that make student loans said they expect their commitments to provide such loans this fall will decrease compared with last year. 

Bernanke: Action Needed to Avert Foreclosure Crisis (5/6/08)

The nearly unprecedented decline in home prices that is a key factor in the current wave of foreclosures will require a concerted government and private-sector response, Federal Reserve Chairman Ben Bernanke said at a Columbia Business School dinner in New York on May 5th. “Realistic public- and private-sector policies must take into account the fact that traditional foreclosure avoidance strategies may not always work well in the current environment,” Bernanke said. He added that Congress can take an important step by moving quickly to reconcile and enact legislation permitting the Federal Housing Administration “to increase its scale and improve its management of risks.” “Doing what we can to avoid preventable foreclosures is not just in the interest of lenders and borrowers. It’s in everybody’s interest,” Bernanke said.